AT&T profits fall sharply, but wireless subscribers flock to iPhone

The big news from AT&T's first quarter earnings report is that both revenue and profits dropped; revenue fell $1.7 million, and profit dropped by $4 million, or 9.7%.

While the company continues to suffer drain from its wireline services, AT&T's wireless business is booming, adding a net 1.2 million subscribers in the quarter. Of that 1.2 million, some 875,000 signed new contracts. Industry researchers at Changewave recently found that of all the mobile operators, AT&T consistently manages to attract and keep the most new subscribers, and many suspect the iPhone is responsible.

AT&T reported 1.6 million iPhone activations in this most recent quarter, indicating that a majority of new contracts were for Apple's now-ubiquitous device. AT&T is reported to be in talks with Apple about extended its iPhone exclusivity, which is due to expire in 2011.

Because of the increased demands placed upon AT&T's 3G network by devices such as the iPhone and BlackBerry Bold, the company was reported to be looking at increasing the speed of its HSDPA 3G network. The "speed limit" of AT&T's network is currently 3.6 Mbps, and a software upgrade could double that to 7.2 Mbps.

While pundits have taken this upgrade to mean that a new iPhone will be released soon, HSPA infrastructure and chipmakers Ericsson told Betanews in January 2008 that such an upgrade for AT&T's network was already pending, when Ericsson was testing a PCI Express 3G modem, and the iPhone 3G was still half a year away.